IT investment pays dividends

IT investment has a substantial, quantifiable impact on business
productivity, according to the Office of National Statistics and the London
School of Economics.

While the report highlighted some differences between sectors – use of
technology by service companies generated 14% increased productivity compared
with 10% in manufacturing, for example – it found that all businesses made
‘significant statistical returns’ on IT capital investment.

Networked computers had an even greater effect: employees with internet
access contributed 2.9% in productivity gains, compared with 2.2% for staff
using standalone systems.

But UK businesses still had lessons to learn from their US counterparts. US
multinational subsidiaries in this country experienced an 8% higher productivity
gain from IT investment than domestic UK firms.

More than 80% of this advantage was explained by better use of IT, said the
ONS report.

The research is relevant to both business and government, according to Jeremy
Beale, head of e-business at the Confederation of British Industry.

‘It showed that IT investment and use is a macroeconomic issue, and the
Treasury needs to start looking more systematically at what could be done to
help companies implement good online working practices,’ he said.

‘From a business perspective there is a lesson about how US firms have
learned to use technology and combine that with the optimum business processes.’

The ONS figures confirmed the common sense perception that IT is good for
business, said Beatrice Rogers, e-business programme manager at IT industry
trade body Intellect. ‘This is a chance for the government to put IT at the
heart of policy development, to put these measures in the set of statistics used
to track the economy, and to take decisive action on the UK’s exploitation of
IT,’ she said.

But IT investment by itself is not enough, according to Jim Norton, senior
policy adviser at the Institute of Directors. ‘If you just invest in IT, it does
not help much. Unless you look at the way people use it you don’t necessarily
reap benefits.

‘Multinational US firms lead through a combination of IT investment and
working practices,’ he added.